Understanding Delhi's Minimum Wage: Can We Break It Down into Basic, DA, and HRA?

Hi Everyone,

Recently, Delhi's Minimum Wage is ₹17,232/- for unskilled employees. Can we segregate the minimum wages into allowances like basic, DA, HRA, or any other allowance? Or should Basic + DA be considered the minimum wages? There has been a lot of discussion regarding the structure of minimum wages. Some suggest that Basic and DA should be equal to minimum wages, while others propose that Basic, DA, and HRA can constitute the minimum wages. What should be the approach as per the Delhi Minimum Wages Act?

In 1999, the Supreme Court in Airfreight Ltd Vs State of Karnataka ruled that if you are paying a salary in total more than the minimum wages, there is no need to look into the components like Basic and DA. That verdict permits the bifurcation of salary into various components like, as you said, HRA, Conveyance, and other allowances. What is to be ensured is that the total of these allowances should be equal to the statutory minimum wages fixed, say, Rs 17,232.

However, when deciding on payments like bonus, leave encashment, contribution to EPF, and payment of gratuity, you should consider the consolidated salary. You cannot then take just the basic pay alone. The amended Bonus Act also states that it should be payable on minimum wages. The EPF has clarified that PF contributing salary should be the total salary and, of course, in the case of a salary above Rs 15,000, it can be limited to Rs 15,000, but you cannot make it payable based on the basic pay that you fix. Similarly, in the calculation of leave surrender, you should consider the salary equal to the minimum wages, not the basic pay alone. The same principle shall apply to the calculation of gratuity.

In view of the above, it is accepted that in the case of wages within the scope of the Minimum Wages Act, the same should be Basic wages and DA. Any amount exceeding the notified wages shall be put under any component that you like. This would avoid confusions in fixation and protect the employer from legal battles.